Millers' role may not come under close scrutiny: Cabinet meeting on 'sugar crisis' today

The Federal Cabinet, which is scheduled to meet on Wednesday with Prime Minister Syed Yousuf Raza Gilani in the chair, will discuss the "sugar crisis" in the country after Pakistan Sugar Mills Association (PSMA) has refused to sell the sweetener at Rs 40 per kilogram, fixed by the Lahore High Court (LHC), well-informed sources revealed to the Business Recorder on Tuesday.
The Cabinet is, however unlikely to take any firm step against sugar mill owners as most of the mills belong to politicians sitting in both the treasury and the opposition benches. The sources said that the Ministry of Industries and Production, already accused of collaborating with the "sugar mafia," has sent a hurriedly prepared summary to the Cabinet titled "Action taken to deal with sugar fiasco."
The primary purpose of this meeting is to resolve "current price dispute" between the sugar millers and provincial governments so that the public may easily procure sugar at a reasonable price during Ramazan. Supply of sugar through utility stores from the Trading Corporation of Pakistan (TCP) will also come under discussion.
In the open market, sugar price is ranging between Rs 52 to Rs 60 in cities and rural areas and the TCP is unable to meet the demands of the public. The Cabinet is expected to discuss initial thoughts on long-term strategy for sugar.
According to these sources, the Cabinet Division has also consulted the recently restored Chairman of Competition Commission of Pakistan (CCP) Khalid Mirza on alleged cartelisation in the sugar sector.
The CCP, in its presentation, yet to be given to the Economic Co-ordination Committee (ECC) of the Cabinet, a copy of which is available with this newspaper, has painted the PSMA as a powerful political lobby whose activities with regard to price manipulation arouse suspicions.
"The CCP feels that the sugar mills represent a powerful political lobby and proceedings against a charge of collusion in price setting would require full support of the government," the sources added. The Prime Minister had fixed ex-mill price of sugar at Rs 45 per kilogram, by reducing taxes, including general sales tax (GST) by 50 per cent.
It is interesting to note that the government was charging GST of Rs 28 per kilogram. On June 15, the ECC had expressed a serious concern over increasing trend in sugar prices and action for release of stocks held by millers was urged, but the highly "connected" lobby thwarted the government's plan with the help of "insiders" in the Industries and Commerce Ministry.
"The CCP has not been able to prove a cartel in the sugar industry despite the fact that the activities of the PSMA have always aroused suspicions," the sources said. The sources said Monopoly Control order of Sept, 2005 concluded that 27 undertakings, involved in "hoarding," were directed to discontinue the practice and refrain from creating an artificial shortage. As a result of MCA's direction, some stocks were released by the sugar mills.
The State Bank of Pakistan (SBP) had also warned that it would use its influence on sugar mills for the release of sugar stocks, aimed at bringing down sugar prices in the domestic market. It set the deadline of July 31, 2009 for clearance of loans and advances, taken against sugar stocks to discourage hoarding of sugar, but recently the date has been extended after high level contacts between the PSMA, SBP and the Finance Ministry.
According to official documents, the ECC members were apprised that the government had concrete information of hoarding and cartelisation by the sugar millers and now action was necessary against them immediately. "Most of the sugar millers have connections with politicians, both from treasury and opposition benches. That's why no action has been initiated against them.
The CCP's recommendation is that the government should support and assist the CCP in carrying out a detailed competition assessment of the sugar sector so that abuses, if any, can be identified and then addressed," the sources said.